Global Virus Network Spring Meeting May 31, 2013 Munich, Germany

1. The State of Healthcare Worldwide: A Rallying Call for GVN Global Virus Network Spring MeetingMay 31, 2013 Munich, Germany G. Steven Burrill Chief Executive Officer Burrill & Company

2. Without energy, food and clean water, nothing in healthcare is relevant…

3. Healthcare:A Menu Without Prices

4. Healthcare: Procedures Cost Outcomes Value

5. Healthcare systemsface chronic problems

6. A Worldwide Phenomenon • “Population aging is unprecedented, a process without parallel in the history of humanity.” • World Population Ageing 2009 United Nations Proportion of world population 60 years or over, 1950-2050 Source: United Nations

7. A Financial Crunch As people live longer and birthrates fall, the ratio of working people paying into healthcare system to those using the public benefits —the elderly — shrinks Total world fertility rate and life expectancy at birth 1950-2050 Life Expectancy Total Fertility Source: United Nations

8. Diseases of Aging Push System to the Brink The direct annual costs of diseases of aging in the United States: Cost in Billions Source: National Cancer Institute, American Lung Association, American Alzheimer’s Association, The Hastings Center, American Diabetes Association

9. Chronic Diseases Constitute the Majority of Healthcare Costs Total Cost = $2,106 (in USD B) 75% of Total Cost 25% Heart disease and stroke = $653 Other = $342 Cancer = $396 Diabetes = $226 Obesity = $209 Arthritis = $190 • Source: CDC, US Department of Health & Human Services

10. Prosperity Is Spreading Annual change in GDP, adjusted for inflation By 2020, 900 million people will move from poverty into the middle class in Asia, according to Mckinsey Emerging Economies Advanced Economies Year Source: IMF

11. But Changing Lifestyles Fuel Chronic Disease Too

12. Non-Communicable Diseases Take a Growing Toll Worldwide • Account for 63% of deaths worldwide • Cost more than $30 trillion over the next 20 years • Cause nearly 80%of deaths in low- and middle-income countries Source: World Economic Health Forum and the Harvard School of Public Health; World Health Organization

13. Developing Regions Face Rising NCD Challenge Deaths from NCDs as a percent of total deaths, 2008-2030 Source: World Bank, WHO

14. The Impact of Urbanization, Longevity and Better Lifestyles More than 371 million people have diabetes Source: International Diabetes Foundation

15. Today’s World Fuels the Threat of Viruses • Population density • Global Travel • Global Food Supply • Risky behaviors (unprotected sex, intravenous drug use) • Blood transfusions

16. Hepatitis C: A Silent Epidemic One of every 33 baby boomers are infected with hepatitis C - Centers for Disease Control and Prevention

17. Healthcare costs are rising to unsustainable levels

18. Healthcare Cost Rapidly Increasing not Only in the U.S. Health Costs as a Percent of GDP U.S. OECD outside of the U.S. 21 19 17 15 13 11 9 2018 2020 2006 2008 2010 2012 2014 2016 Source: PricewaterhouseCoopers Health Research Institute

19. A Menu Without Prices: Out-of-Pocket Costs 14% of Spending U.S. Healthcare Spending in 2011: Where the Money Came From Source: Centers for Medicaid and Medicare Services

20. A Dose of Reality: Prescription Drugs Represent 11% of Costs U.S. Healthcare Spending in 2011: Where the Money Went Prescription Drugs Source: Centers for Medicaid and Medicare Services

21. Spending Does Not Equate to Quality U.S. spends two-and-a-half times the OECD average Per capita healthcare expenditures in USD • In the Netherlands, it is not possible to distinguish the public and private share related to investments. • Total Expenditure excluding investments Source: OECD Health Data 2012

22. But U.S. Has Lower than OECD Average for Life Expectancy Per capita healthcare expenditures compared to life expectancy by country in 2010 Source: OCED

23. Healthcare: The Wrong Tool for the Job • Health systems in emerging countries built to combat and treat infectious diseases • Historically focused on episodic and acute care • Reimbursement / payments generally cost and procedure based • Changing disease burden requires chronic disease management and patient education • Source: Economist Intelligence Unit

24. Emerging Markets: Staffing and Facilities Challenges India faces shortage of nearly 5,000 primary health centers and more than 2,500 community health centers in 2008 The shortage of doctors is “one of the biggest impediments to strengthening of the public health delivery system and scaling up access to care.” Manmohan Singh, Indian Prime Minister 2009

25. Economic Disparities Create Health Disparities in Asia • Much of healthcare in Asia is funded out-of-pocket • Rural, poorer areas often lack care seen in urban areas • India has six times more doctors per capita in urban areas than rural areas • Taiwan introduced national health insurance and saw disparities in access decreased Source: Economist Intelligence Unit

26. Health Systems Fail to Use the Data That’s Gathered • Lack of efficient systems • Connectivity largely does not exist in most countries • Use of electronic health records growing, • but lack of interoperability between systems • Other data not integrated

27. Big Questions Without Easy Answers • Who should pay for healthcare and who should decide course of • care? • How do we balance individual responsibility with societal costs? • Should safety and efficacy alone be the standard for approval, or should cost be a factor? • What does innovation mean today? • How do we determine value?

28. As Costs Rise, Governments Demand Value for Their Money Pricing pressures will alter pharmaceutical development strategies • Germany’s new drug pricing law AMNOG • U.K.’s National Institute for Health and Clinical Excellence • U.S.’s Independent Payment Advisory Board • India’s Department of Pharmaceuticals Cost-based systems become value-based

29. Value Creation Is Different Than Value Capture Value Creation -company perspective- higher value products greater profits Value Creation -customer perspective- more for less Value Capture-everyone's perspective- what payers will pay for • Targeted therapies • Rare diseases • Unmet medical needs • Faster regulatory path • Less competition High margin products Dominant market share Broad markets Reduced competition Generics OTC products Biosimilars Cheaper products

30. Life Sciences Companies Capturing Value Outside Product Too • 23andMe • Business focused on selling DNA analysis • for ancestry and health data • But finds value outside product: • Company wins patent for polymorphisms • associated with Parkinson’s disease • Hired by Genentech to enlist breast cancer patients in a • study to predict which patients benefit from the use of Avastin

31. Forging a New Relationship with Patients Introduced digital health diabetes self-management program using digital coaching and wireless glucose meter to transmit data to clinical monitors Seeks to improve patient outcomes through interactive web application for patients and doctors with initial focus on patients at risk for diabetes and cardiovascular disease Launched a pharmacy-based service in the United Kingdom to provide health screenings to prevent heart attack and stroke

32. Can Pharma Leverage Assets to Capture Value Outside Products? • Pharma needs to think of new ways to leverage: • Relationship with payers, patients, • providers and doctors to sell services • Distribution networks • Manufacturing • Data assets • Intellectual property • Research resources

33. Others Have Learned to Capture Value Outside Products Amazon: Builds cloud computing business Facebook: Online retail program “Real Gifts” to allow users to send gifts to friends and family Safeway: Provides detailed data grocer can sell to marketers to help maximize customer’s spending in store

34. Viruses place burdens on healthcare and costs

35. The Threat of Outbreaks Are with Us • Avian Flu • SARS • MERS • Ebola • Norovirus

36. A Disease that Changed Drug Development • HIV/AIDS identified in 1981 • Political battles lead to changes that accelerate the development and review of many drugs • Combination therapies now routinely applied in other diseases

37. The Public Imagination: Fact or Fiction, Viruses Sell

38. But NIH Funding For Viral Research Flat

39. Viruses Are Not Just About Infectious Disease Viral infections are associated with: • Athersclerosis • Obesity • Autoimmune disease • Cancer

40. A Multipronged Approach

41. How to Combat Viruses? A Three-Pronged Approach Improve Health Prevent Infection Treat Infection • Nutrition • Sanitation • Surveillance • Protective gear • Vaccines • Diagnostics • Therapeutic Vaccines • Antiviral drugs • Gene therapy

42. Improving Resistance by Improving Health • The link between malnutrition and infectious disease creates a cycle of poor health • A lack of nutrients weakens the immune system • Those that are malnourished are vulnerable to infections • Leads to diarrhea and inhibits the body's ability to absorb nourishment

43. Improving Health: Poor Sanitation Promotes Viruses • Norovirus is the leading cause of gastroenteritis worldwide • Causes sudden onset of nausea, vomiting, and diarrhea • Excreted in high concentrations in feces and vomit therefore readily transmitted by the fecal-oral route through person-to person contact or through fecal contaminated foods, water or shellfish

44. Increased Travel Spreads Viruses The growth and ease of international travel has rendered traditional disease control and quarantine strategies increasingly irrelevant. “With no apparent end in sight to the continued growth in global air travel and shipborne trade, we must expect the continued appearance of communicable disease pandemics, disease vector invasions and vector-borne disease movement.” Source: Advances in Parasitology: Global Transport Networks and Infectious Disease Spread

45. Prevention: Improved Surveillance through Digital Health In South Korean, quarantine officers use thermal cameras to monitor the body temperature of passengers arriving from overseas to detect possible swine flu infection Taiwan airport entry gates use infrared devices to measure temperature of travelers entering the country for early detection of people with dengue infection

46. Real-Time Data Will Influence Behavior The U.S. Centers for Disease Control sees a moderately severe flu season while Google warns of one of the worst flu seasons on record

47. Prevention: Protective Gear Gloves, eyeware, and respirators for healthcare workers Masks and condoms for the public

48. Prevention: Vaccines Begin to Address These Issues • Introduction of vaccines for: • Pneumococcal disease • Rotavirus diarrhea- the leading cause of diarrhea-related death in children under five, claiming 450,000 lives every year • Chronic diseases such as liver and cervical cancer Source: Global Vaccine Action Plan

49. Success of Vaccines • Over the past several decades, immunization has: • Eradicated smallpox • Saved lives • Lowered the global incidence of polio by 99 percent • Reduced illness, disability and death from diphtheria, tetanus, whooping cough, measles, influenza, and epidemic bacterial meningitis • Prevented roughly 2.5 million deaths per year

50. A Vaccine Success Story Measles cases in England and Wales, 1940-2007 1986-2007 Source:  CC Health Protection Agency